Unlocking the Triple Lock
Aaryaman Banerji, 22 November 2022
Out of date. Out of time. But not yet out of favour (in Westminster). The Chancellor’s decision to protect the triple lock on pensions last week, in a statement that promised radical spending cuts across the rest of the board, was a blasé wave of the proverbial middle finger in the direction of Britain’s working age population.
The political climate has shifted drastically since the scheme’s introduction over a decade ago. The Cameron-led Conservative party of-the-day designed the pledge in order to ‘lock in’ the country’s grey voters ahead of the 2010 election. On the surface, the plan to offer increasing security for pensions by ensuring the basic state allowance rises each year in line with the highest of inflation, average increase in wages, or 2.5 per cent seemed a compelling insurance policy for Britain’s elderly population.
That idea, however, was not designed for an era of low wages rises. Less still, one where the number of pensioners living in ‘millionaire’ households has tripled over the previous decade. Between the scheme’s implementation and 2020, state pensions increased by 37 per cent in cash terms. It is a stark and insulting contrast to the less than 20 per cent increase of average earnings during the same period. It seems an increasingly uncomfortable truth that at a time of rising inflation and an increase in the cost-of-living, that it is Britain’s increasingly brittle backbone that is being made to carry the biggest financial burden.
This, too, at a time when Britain’s current working age population are earning less and owing more than their predecessors. Having seen their working lives already hit by an unsavoury cocktail of one recession and once-in-a-century pandemic, people born between 1981-1996 (Millennials) are seeing 20 per cent less in real take-home income than those born between 1946-1964 (Boomers) did at the same point of their lives. This has diffused into the increasingly perilous property market, with only 27 per cent of Millennials in current ownership of a property, in comparison with 65 per cent of Boomers at a similar age.
The decisions made in the Autumn Statement therefore, to raise taxes and reduce allowances in areas which most greatly Britain’s working population, will come as a firm right hook to many of those already on the ropes.
And to what end? On the Chancellor’s mission to save £35 billion and fix Britain’s ‘black hole of debt’, plans such as cutting dividend allowance and decreasing the amount of savings to qualify for an exemption on capital gains will save the government a relatively miserly sum. Meanwhile, unlocking one of the three locks on pensions, and linking any rises to earnings not inflation, will create £6 billion.
Ahead of his Autumn Statement, Jeremy Hunt warned of ‘difficult decisions’ on the path ahead. It is increasingly tough to have faith, however, in a statement which has set out to play political gymnastics with the easy ones.
Aaryaman Banerji is a Civitas researcher